February 21, 2019 | The True Cost of Climate Litigation in Canada

Stewart Muir

Stewart Muir is founder and executive director of the Resource Works Society, a Vancouver-based group open to participation by British Columbians from all walks of life who are concerned about their future economic opportunities. He is an author, journalist and historian with experience on three continents including a financial editor of The Vancouver Sun responsible for mining and markets coverage. Since Resource Works was established in 2014, the group has gained international recognition for its practical approach to the public challenges of responsible natural resource development and use.

POLICY BRIEF: Should corporations be sued for supplying fuels to local residents? Stewart Muir, Resource Works founding executive director, takes a look at a campaign imported from the United States where it has met with little success in the legal system.

Executive Summary

Over the past two years, environmental activist groups in Canada have lobbied municipalities to undertake costly lawsuits against energy producers in an attempt to hold their companies liable for the costs of climate-related impacts to municipal infrastructure. These groups are misleading communities and officials by arguing that litigation on climate change would effectively get companies to “pay their fair share of local costs.” In reality, these efforts threaten to increase the financial burdens for the very localities they claim to protect.

While climate liability suits have yet to be filed, the potential consequences of supporting the concept are several-fold:

Climate change is a global issue that should be dealt with all levels of government in ways appropriate to the powers of each level. It is an inappropriate use of the legal system, as engaging in possibly years-long litigation on climate with minimal chance of success would add incalculable costs to municipalities and likely result in more job losses for Canadians employed in the oil and gas industry.

Fuel products from petroleum and clean natural gas are vital for maintaining modern society – heating our homes, fueling our transportation networks, and allowing our food to be grown. Randomly targeting a handful of energy companies active in Canada – which are already some of the most efficient and environmentally advanced producers in the world – not only creates the potential to increase costs for every Canadian by discouraging development. It is a harmfully over-simplistic response to a global issue.

While the public officials who agree to back climate liability lawsuits might intend for them to serve as a positive public relations campaign to demonstrate their concern for the environment, this litigation has significant repercussions. In effect, these suits would alienate industries that support substantial portions of the Canadian economy, as well as chill the ability for government and business to work together on solutions for tackling climate change.

Pursuing frivolous and costly climate change lawsuits diverts attention away from common sense solutions to improve the environment and lower greenhouse gas emissions. Before the first lawsuit has even been filed in Canada, the climate liability campaign has already sowed further division on an already contentious issue, and it’s the Canadian public who stand to lose from these efforts.

1. Inappropriate Avenue: Climate Change Should Stay Out of Legal System

The global nature of climate change and pervasive nature of fossil fuel use present major obstacles to any attempt to hold any company or individual liable for the impacts of climate change. In fact, this has been a major hurdle for similar lawsuits that have been filed against fossil fuel companies in the United States and there is no reason to doubt that the same obstacles will appear if the lawsuits are filed in Canada.

Climate liability lawsuits are typically compared to past class-action lawsuits against tobacco and healthcare companies. In those class-action lawsuits, people who suffered health defects from those products and were not warned by the companies, despite internal company research showing a link between their products and health defects, were eventually able to hold the companies accountable for some of their health-related costs.

However, the essential links made between tobacco companies and the health of those who sued those companies, as well as the market share of each company’s contribution, do not exist with fossil fuels and climate change impacts.

Undoubtedly, climate change is a global issue. According to the International Energy Agency, over 70 percent of global energy demand was met by oil, natural gas and coal, and that demand is growing. Greenhouse gas emissions from this activity do not stay within a country’s borders, making it impossible to attribute the exact impact of a single producer in a single country on a specific community.

In addition to the global nature of the issue, there are numerous industries and individuals who are responsible for burning fossil fuels and releasing greenhouse gases into the atmosphere. Therefore, it is nonsensical to attempt hold a handful of companies in one industry liable for the climate-related impacts to a municipality when countless other sources exist.

Attributing the exact climate change impact to a specific municipality is similarly difficult. Despite years of scientific study leading to a consensus over the adverse impacts of anthropogenic climate change, pinpointing the exact impacts of climate change on a specific municipality’s infrastructure and then estimating monetary damages requires an inordinate level of additional analysis. Infrastructure deteriorates over time for a variety of factors and must be maintained and updated regardless of the climate.

This is likely why the West Coast Environmental Law Centre (WCEL), the environmental activist group spearheading the climate liability campaign in BC, sent a letter to Premier John Horgan, which asked the provincial government to enact a new law to “clarify” the legal rules for people harmed by climate change to sue fossil fuel companies for a “fair share” of climate costs. The press release accompanying the letter stated that it demands that BC enact legislation that would “streamline climate lawsuits” – a clear recognition that these suits are set up to fail without significant changes to provincial law to facilitate them.[1] .

WCEL also noted in the letter that their legislation is modeled after a BC law that was needed, “…to enable lawsuits to recover healthcare costs from cigarette manufacturers.”[2]

In the letter the group even revealed the critical need for the legislation and cited the potential for a long and expensive legal battle as well as a forum to attempt to settle some of the attribution issues mentioned above:

“…there are significant advantages to the Legislature, rather than the courts, clarifying the legal rules for liability in such cases. Enacting a Liability for Climate-related Harms Act may clarify the legal rules more quickly and cheaply than could occur through protracted litigation, as well as giving the public’s representatives an important opportunity to investigate and quantify the costs of climate change and to discuss the role of the fossil fuel industry in paying for those costs.”

WCEL also cites lawsuits filed by U.S. municipalities against energy companies on the basis of climate-related impacts, including “New York City, King County (in Washington State), San Francisco and other communities.” However, WCEL failed to mention that the San Francisco lawsuit was dismissed the month prior when a U.S. federal judge ruled that the courts were not the proper place to deal with the issue of climate change. Judge William Alsup noted in his opinion:

“The problem deserves a solution on a more vast scale than can be supplied by a district judge or jury in a public nuisance case.”

Meanwhile, the lawsuit filed by New York City against U.S. energy companies was dismissed just three days after WCEL released their press release – and for the same reason as the San Francisco case. In the New York City lawsuit, the judge also ruled that courts were not an appropriate place to handle the issue. Specifically, Judge John Keenan wrote:

“Climate change is a fact of life, as is not contested by Defendants. But the serious problems caused thereby are not for the judiciary to ameliorate. Global warming and solutions thereto must be addressed by the two other branches of government.”

Managing Partner Colin Feasby at the law firm Osler, Hoskin and Harcourt LLP recently penned an article[3] about climate change litigation and stated how it is common for legal strategies from the United States to cross into Canada due to similarities in our legal systems, making the results of similar cases significant:

“There are reasons that Canada may be fertile ground for climate change litigation in the near future, in part because the common law of nuisance, trespass and negligence is similar in the U.S. and Canada.”

Feasby continues:

“Canadian claims are far from assured success, as the theories on which claims by U.S. cities were pre-emptively dismissed may provide a basis for defending claims in Canada.”

It seems that WCEL is being disingenuous by leading municipalities into a process even they admitted could take years and carry significant legal costs. Instead of municipal councils focusing on how to best serve and improve their communities, WCEL would rather local officials spend precious time and taxpayer money on an issue that, legally, has no business being decided on in the court system.

2. It’s Not Just Companies that Would Shoulder the Cost of Litigation

Climate liability lawsuits would further hinder Canadian oil and natural gas development, which means higher prices for the over two-thirds of Canadians who rely on natural gas or heating oil to keep their houses warm, the residents of Alberta where over 38 percent of electricity comes from natural gas, and every Canadian filling up their car on the way to work.

Canadian energy producers are also subject to some of the most stringent regulations in the world, requiring oil and natural gas companies to be efficient in production and comprehensive in their efforts to mitigate environmental impacts. In fact, greenhouse gas emissions from each barrel of oil produced from oil sands have fallen 29 percent since 2000.

Therefore, if Canadians are unable to rely on some of the most environmentally responsible oil and gas companies to produce the resources they rely on domestically, these resources could potentially be brought in from foreign countries where regulations aren’t as stringent. This would be a lose-lose situation: prices would be driven higher due to lower oil and gas production at home, while the resources we depend on would have to come from unreliable and less environmentally friendly sources.

While no one is questioning the desire to protect and improve our environment, it’s critical that local officials do not think of the climate liability campaign as an effective way to accomplish that goal. In addition to the previously stated costs, these lawsuits could create significant and lasting damage to regional economies and Canada as a whole.

Canada is the fourth largest producer and exporter of oil in the world, with roughly 10 percent of the world’s proved oil reserves. Add to this the average of $15.7 billion in annual government revenues from 2012 to 2016 generated by the industry, it is undeniable that oil and natural gas production is a major contributor to the Canadian economy. If climate liability lawsuits are successful – or even just filed against Canadian producers – that could have a harmful chilling effect across the industry and economy.

Environmentalist groups such as WCEL are throwing around figures like $5 billion in reference to the cost of climate change to Canada and claiming that having companies pay for these damages is “good economics.” But considering the industry accounted for $97 billion in exports in 2017 – about 19 percent of Canada’s total for that year – and represents 2.6 percent of the Canadian GDP, attacking and potentially crippling such a significant part of the Canadian economy is by no means “good economics.”

Further, the role that oil and natural gas production plays in Canada is more than percentages and massive numbers, it’s also how thousands of Canadian men and women support their families. Over 197,000 people are directly employed by Canada’s oil and gas industry as of January 2019, with some provinces relying more heavily on the industry than others. Alberta, for example, accounts for over 156,000 oil and gas jobs. Even in places where oil and gas development seems like a faraway activity, the industry still supports a substantial number of workers.

Another repercussion from supporting these climate lawsuits is that they hurt local businesses and citizens who are not even employed by energy companies. Following a letter sent by the mayor of the ski resort town of Whistler to oil and gas companies asking them to pay for climate change, a number of energy companies pulled out of an institutional investor conference in the resort town, depriving their community of that revenue. The letter, which WCEL helped draft, also saw pushback from citizens and businesses within the town, as they are almost solely dependent on tourists.

Instead of damaging letter writing campaigns or costly lawsuits, we should work together on productive and proactive solutions to mitigate climate change.

LNG Canada, for instance, is an example of collaboration achieving positive and tangible results to lower emissions . After concerns were raised regarding the project’s methane emissions, Shell announced that the Groundbirch site will employ new state-of-the art technology which will emit less than half of Shell’s already ambitious goal for similar sites. This is significant, as the site is estimated to supply nearly 40 percent of the natural gas that will be liquified and exported to Asian markets and replace coal, which emits nearly twice as much carbon dioxide as natural gas.

Local governments have control or influence over about 45 per cent of GHG emissions[4] in the province of British Columbia and this is likely a reliable rule of thumb in general. Over the past dozen years municipal governments have been taking a lead position by implementing policies that tackle things that are realistic and within reach, such as building codes, transportation infrastructure, and the use of renewable energy. According to the Province of British Columbia, 187 local governments – 98 per cent of the total – are signatories to the Climate Action Charter working towards carbon neutral operations, community-wide emissions, and compact, energy-efficient communities.

4. Wider Context

By focusing on things that they can actually do, municipalities have managed to make a difference while avoiding the airy promises the public has come to associate with so many initiatives from other levels of government. Adding nebulous, expensive and long-shot litigation against specific corporations removes the focus from local action, while potentially diluting the resources available for that action.

Modern oil and gas companies that want to survive in the energy business over the long term are continually investing in more environmentally efficient operations. Innovation capable of transforming our energy systems for the low-carbon future will come from many sources, and existing companies investing in costly R&D are at the leading edge of that story. Stifling the very companies that are driving innovation in our energy-intense civilization is not just a poor idea, it is one that could exacerbate climate harms.

Local officials should think about the thousands of families supported by the energy industry, when they consider supporting the climate liability campaign, rather than just engaging in a public relations stunt. Use of terms like “just transition” implies the existence of a simple and inherently virtuous path away from fossil fuels that is possible if only we wish it so. This belies (a) the vast amount of effort already being expended on climate policy implementation and (b) the idea that a plethora of high-value, export-creating, family supporting “replacement” jobs will magically appear once climate litigation has its intended consequences of curtailing the gatherings of productively employed capital and expertise that make up the energy companies being targeted.

Conclusion

When it comes to transitioning to a low carbon economy, there are right ways to go about things and wrong ways. It’s imperative that in the case of proposed litigation, municipal councils make the right choices. The false dichotomy of decarbonization versus successful oil and companies is based on creating conflict. Dealing with climate change by exacerbating the divide over an already contentious issue is not a practical solution. These baseless lawsuits draw attention away from collaborative solutions to improve the environment.

Given the financial, economic and time costs associated with pursuing climate litigation, local officials and communities should seriously consider the repercussions of supporting the litigation campaigns. Rather than just providing positive public relations support or allowing individual members of local government to signal their concern for the environment, these lawsuits could potentially inflict significant economic damage to the local and national economies.